Monday, September 2, 2013

De Beers August Sight Estimated at $520M

The De Beers August sight closed with an estimated value of $520 million
after sightholders refused a significant volume of the goods on offer.
Reports from the sight indicated that De Beers adjusted prices on some
goods with the main declines impacting the cheaper Indian and rejection
boxes.

Sightholders noted that the adjustment was not enough to
counter the recent devaluation of the rupee against the U.S. dollar,
which has impacted liquidity and sentiment among Indian diamond
manufacturers.“It
was a difficult sight,” said Nigel Simson, the recently appointed
senior vice president of global sightholder sales at De Beers. “There
was a lot of focus on the rupee as it kept moving during the week,
creating some concern. We did adjust prices, but we’re not in a position
to follow the rupee.”

The rupee slumped to a record low of
69.22/$1 on Wednesday during sight week. The currency fell 8.1 percent
during August, recording its worst month since 1992, according to Bloomberg.

One
India-based sightholder noted that liquidity in the manufacturing
sector is tight due to the weak rupee and as banks have become more
prudent in their lending to the industry. “Liquidity is the biggest
issue at the moment,” he stressed. “There’s no activity on the secondary
market and people are not buying without 90 to 120 days credit.”

Most sightholders who spoke with Rapaport News
said they expect De Beers will reduce prices at the October sight due
to the lack of liquidity in the market. “People are not happy,” said one
sight participant. Sightholders are starting to take a different
approach and are refusing goods because they feel that enough is enough.
They are not prepared to take the losses that they have in the past two
years anymore.”

Rapaport News estimates that up to $80 million worth of rough was refused at the sight.

While
De Beers reduced prices by an estimated 3 percent to 4 percent in the
Indian boxes, prices on average remained basically the same. Assortments
were unchanged and there was very little ex-plan supplied at the sight.

Simson noted that De Beers expects the market will improve in
the coming months and that global diamond demand is still projected to
grow in 2013.

“We’re about to enter a crucial time when the
retailers and wholesalers are looking for goods for the holidays, and we
feel that the retailers are fairly low stocked,” Simson said. “Soon the
peak season will begin with Diwali and Thanksgiving and the U.S.
holiday period, extending through the first quarter for the Chinese New
Year. So it’s understandable that the manufacturers are holding stock
and that liquidity is tight.”

Mike Aggett, managing director of
H. Goldie & Company, a diamond brokerage and consultancy, suggested
that retail demand will likely be late this year, thus adding to
manufacturer’s liquidity challenges.

“Many areas of polished have
also seen prices soften over the past few months putting additional
pressure on manufacturers,” Aggett wrote in his blog about the sight.
"And while a selling season is expected, particularly in the American
market [with] report[s] [regarding] low stocks at the retail level,
demand is almost certainly going to be late with retailers putting even
further pressure on cash strapped manufacturers."

The next sight,
which will take place in the first week of October, will be the final
sight that De Beers holds in London. The company is on schedule to
transfer its global sightholder sales division to Gaborone, Botswana in
time for the November sight.